QHA_August-2021-Digital

NEWS
RESTRUCTURING RULES
QHA REVIEW | 8
As small businesses around the country struggle to
stay afloat in the wake of the constant challenges
presented by COVID-19 shutdowns and social
distancing rules, chartered accountants BDO Australia
have reported a slow uptake of new processes aimed
at making restructuring or exiting businesses simpler.
The Australian Tax Office website states that changes
put in place by the Australian Government from 1
January 2021 were aimed at making changes to the
country’s insolvency framework to help more small
businesses restructure and survive the economic
impact of COVID-19.
Where restructuring is not possible, businesses will
be able to wind up faster, enabling greater returns for
creditors and employees.
Two new processes are available for small businesses
from 1 January 2021: are a simplified liquidation
framework and a small business (SB) restructuring
plan.
Writing for the Australian Institute of Company
Director’s website BDO’s National Leader Business
Restructuring Andrew Fielding said take up of
restructuring for small businesses provided by the
legislation has been slow, but this may change now
JobKeeper assistance has come to an end.
“The small business restructure reform is intended
to provide a path back to solvency for companies
impacted by the global pandemic,” Andrew said.
“Key elements of the legislation include a new debt
restructuring process for eligible small businesses.
“This regime, supervised by a Small Business
Restructuring Practitioner (SBRP), enables financially
distressed companies to restructure their existing
debts by proposing a restructuring plan to creditors
within 20 business days.
“During the restructuring period, the director will
remain in control of the company, and capable of both
entering into transactions and dealing with company
assets - in the ordinary course of the company’s
business.
“The SBRP will have to grant permission for any
transactions or sale of assets outside of the ordinary
course of the company’s business.”
To access the Small Business Restructuring process,
companies must satisfy a number of criteria including
not having liabilities in excess of $1 million, having
all employee liabilities up to date, and ATO tax
lodgements up to date.
For those companies that are eligible to access the
restructuring program the Board will have resolved that
it has reasonable grounds for believing the business
is trading insolvent, or likely to become insolvent. At
this point they are able to appoint a Small Business
Restructuring Practioner (SBRP).
“The SBRP acts as an agent for the company in
respect to the restructuring process, preparing
a declaration in relation to the restructuring plan,
administering the plan, and resolving disagreements
relating to a creditor’s admissible debts or claims.”
Andrew said.
“The SBRP also manages the distribution to creditors
under the restructuring plan.
“While the latest legislation created a special class
of SBRPs, which are qualified only for the newest
restructuring processes, it is advisable to retain the
services of a fully qualified insolvency practitioner who
can provide advice on all available options, whether
that is restructuring, liquidation or another option.”
Writing in April Andrew reported that in the three
months prior only 19 companies had declared with
ASIC they were eligible to access the Small Business
Restructuring regime, with less than 10 having
progressed to appointing an SBRP.
“It is expected this slow take up is in part due to the
tight liability cap set on eligibility,” Andrew said.
“Companies with more than $1 million in liabilities
simply are not eligible to access this regime.”
“Directors continue to control and trade the business
during the restructure.
“This differs from other insolvency appointments where
the external administrator takes control, and provides
reassurance and comfort to suppliers that ongoing
trade expenses will be met.
“Directors need to carefully consider the impact
entering restructuring has on secured creditors, any
overdraft facilities and key suppliers. Businesses that
rely on credit may find these terms restructured or